The US stock market showed signs of recovery on Friday, following a dip in the previous session. This was attributed to improving consumer sentiment on inflation, leading to the Nasdaq and S&P 500 continuing their five-week upward trend. However, the Dow Jones Industrial Average was set to break its five-week rally streak after experiencing its largest daily percentage decline in over a year.
The Commerce Department reported that new orders for key US-manufactured capital goods rebounded more than expected in April, indicating a positive trend in the economy. Additionally, the University of Michigan noted that consumers’ inflation expectations improved in late May, suggesting a stronger outlook for future spending. Analysts like Rob Haworth from U.S. Bank Wealth Management in Seattle commented that the data came in better than anticipated, with durable goods showing solid performance. This optimistic sentiment was fueled by the belief that the Federal Reserve might consider cutting interest rates, boosting overall market confidence.
On Friday, the Dow Jones Industrial Average rose by 0.18%, the S&P 500 gained 0.77%, and the Nasdaq Composite climbed 1.21%. While some sectors, such as communication services, tech, consumer discretionary, and utilities, experienced gains, small-cap stocks rebounded post the recent interest rate concerns. Companies like Workday saw a decline in stock value after revising their revenue forecast, while Ross Stores rallied following better-than-expected first-quarter results. Overall, the market sentiment remains positive, with a majority of S&P 500 companies surpassing analysts’ expectations for earnings.
Despite the recent fluctuations, the market is pricing in a 49.4% chance of a rate cut at the Federal Reserve’s September meeting. This is down from 54.8% a week prior, showcasing a slight shift in expectations. Goldman Sachs has adjusted its prediction for the first easing to September from July, reflecting evolving economic conditions. The performance of small-cap stocks, particularly sensitive to interest rates, will be closely monitored in the coming weeks to gauge market stability.
The US stock market showcased resilience on Friday, despite concerns over rising price pressures and potential interest-rate cuts. Improvements in consumer sentiment and economic data contributed to the market’s recovery, with key indices like the Nasdaq and S&P 500 continuing their positive trends. As investors navigate through uncertainties, such as the impact of rate cuts and earnings projections, maintaining a cautious yet optimistic approach will be crucial in navigating the dynamic landscape of the stock market.